Keeping Arteries Cleared And the Courts Clogged

By BARNABY J. FEDER

Published: October 4, 2007

Why would a company argue in court that its medical product is dangerous, even as it plays down the risks in public?

Johnson & Johnson did just that recently as part of its long battle for supremacy in cardiac stents. Its lawyers told a federal judge in Delaware that because medical studies had linked the company's drug-coated Cypher stent to blood clots, it could not have infringed a competitor's patent.

How so? Because, the lawyers said, the patent in question, held by Boston Scientific, claimed that the coating did not cause clots.

That reasoning -- in essence, our product isn't covered by Boston Scientific's patent because our product is a health hazard -- did not impress Judge Sue L. Robinson, who last week affirmed a jury's patent infringement verdict against the Cypher.

But the argument of the lawyers, so at odds with Johnson & Johnson's public efforts to depict Cypher as exceptionally safe, indicates just how tortured logic can become in the industry's long, multipronged patent war over stents -- the tiny mesh cylinders inserted in blood vessels to keep them propped open after blockages are cleared.

Since coronary artery stents were first marketed in the United States in 1994, they have grown into a $6.5 billion worldwide business in which profit margins can approach 80 percent. Because of the money at stake and the complexity of the products, the stent business is an unusually litigious field, with court cases in this country and abroad embroiling all the industry's major players and many smaller ones.

''About $24 billion of these coronary stents have been sold since they went on the market in the United States, with pretty much every dollar attached to one of these cases,'' said Matthew Dodds, a Citigroup analyst. ''It looks like billions of dollars of profits are at stake.''

The disputes not only make it uncertain which companies might ultimately own the profits when the competing intellectual property claims are finally resolved. Some medical experts say the fights are also impeding introduction of new products that might be beneficial to patients.

The legal battles are ''a horrendous waste of money,'' said Dr. Julio C. Palmaz, a radiologist who invented one of the earliest stents more than two decades ago and has often been a witness in patent cases. ''I see my life in three phases,'' Dr. Palmaz said. ''The early years in the lab, the middle years on the road training physicians, and the last third in court.''

The stent companies refuse to publicly comment on the litigation, to avoid revealing their legal strategies and for fear of offending judges. And Wall Street analysts say the legal wheels grind so slowly that none of the major battles are likely to be resolved soon enough to be of immediate concern to most investors.

But at the very least, the uncertainty and the legal costs have played a major role in forcing many of the field's start-up companies to sell out to the bigger players.

One major new legal fault line began developing last year after a Canadian stent start-up, evYsio Medical Devices, sold exclusive rights to stent design patents to Medtronic, a medical device giant that currently has only a small presence in the stent market. An evYsio patent has already become the basis for an injunction in France against the sale of the Xience V heart stent from Abbott Laboratories, a ruling that Abbott is appealing.

Medtronic is pursuing similar actions against Abbott in four other European countries and is challenging both Abbott and Boston Scientific in Federal District Court in San Francisco, while also taking on Johnson & Johnson in Federal District Court in the Eastern District of Texas.

Wall Street analysts expect another new line of cases to spring from Johnson & Johnson's claim that it controls the use of an entire family of anti-inflammatory compounds for use on drug-coated stents -- not just the particular compound that it uses on Cypher. Variations of the compounds are used on stents that Abbott, Medtronic and Boston Scientific hope to begin selling in the United States next year.

All this while disputes dating to the 1990s continue to ricochet through the court system, even as the names of some of the disputants change through mergers or spinoffs.

For now, the biggest battles center on Boston Scientific and Johnson & Johnson. Boston Scientific's drug-coated Taxus, introduced in April 2004, quickly surpassed Cypher from Johnson & Johnson to become the market leader when it achieved $2 billion in sales its first year on the market in the United States -- a record debut for a health care product.

Johnson & Johnson entered the business first by licensing a bare-metal stent in 1988 that Dr. Palmaz developed with the help of a cardiologist, Dr. Richard A. Schatz. Although their original patent expired nearly two years ago, the company is still pursuing past infringers to recover damages.

In 1998, Dr. Palmaz sold full control of all his patents to Johnson & Johnson. One factor, he said, was the company's argument that he would be a more convincing witness in the court battles if he no longer had a financial stake in the outcomes.